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The secret energy crisis

Submitted by PaulS on 13 November 2008 - 7:50pm

Sad as it is, I have to laugh when I hear yet another politician or expert or even journalist telling us that

- Nobody could have foretold the steep rise in oil and energy prices
- Nobody could have predicted the world recession
- Nobody could have foreseen the financial crisis
- Nobody could have prepared for the steep rise in food prices

Wrong, wrong and wrong again.

I am not an expert or a politician, but I have predicted all these and much more back in 2004, which is why since then we started a food business, switched all our energy and fuel to renewables, saved and increased our pension pot, etc. It is uncanny how each and every one of these predictions are slowly but surely coming true.

Of course it is no magic. Actually, anyone can do it. All you need is just one tool: a good understanding of the underlying reason for the increasing prosperity of humankind over the past 150+ years. Once you realise that, you just need to research, absorb and understand how this underlying principle is evolving and changing. Everything else follows from that.

So, what was the underlying reason for our ever increasing prosperity? In a word it was Energy, specifically cheap (almost free) energy.

It was coal at the start, then oil and later natural gas, that is providing humanity with well over 90% of all the energy we use to power our lives, from heating, electricity, transport, manufacturing, agriculture, fertilisers, chemicals and plastics, medicines and much more.

These sources, particularly oil and gas, are extremely energy dense. That is they provide unbelievable amounts of energy from very small volumes. Further more, the material just streams out of the ground (at least it used to), where it was stored under high pressure for some millions of years, so the extraction costs are absolutely minimal.

Consider that one litre of oil provides you, dear reader, with the energy equivalent to about 70 man hours of manual labour (for example it pushes your car with four occupants some 8 miles at 60 mph or it would take 70 men paddling like mad to generate as much electricity on a pedal generator as does one generator running on one litre of fuel). At minimum wage level this human labour energy would cost in excess of £350, but even at $120/barrel it actually costs just 36 pence! (plus tax and profits) That’s what I mean by almost free energy! That barrel of oil typically costs about $1 to pump out of the ground in the Gulf, that is less than 1 cent per litre. So you invest 1 cent and get back $500 (£350) worth of labour!

No previous civilisations had such almost free energy available to them. Even the slavery based energy system of Roman times was far, far more expensive than our current good fortune. And this is exactly why our civilisation has prospered so much.

Just about everything we do is ultimately based on this almost free energy. We have got so used to it that we think little of flying in our millions to some far away destinations couple of times a year, just to have a bit of fun. We buy stuff on the whim and throw it away again, sometimes without even using it. We have come to think that we have a right to just about anything, regardless of the cost, and we compete with each other in our conspicuous consumption.

Why should we have regard to the cost, when the cost is ‘almost free’? Why shouldn’t we explore and exploit every corner of the planet, and why should we limit ourselves to just our own planet when the cost is ‘almost free’?

Well, as it happens there are reasons why we should.

For one thing, we are poisoning ourselves (through waste, carbon emissions, water pollution, chemicals in food and much else). For another, we are killing off just about all the other life on the planet (we are causing some 300 species to die out every single DAY), creating dead zones in the sea, desertification of land, industrial pollution on a massive scale etc, etc. Much has been written on these subjects and it is not my aim to explore these on this occasion.

But even ignoring these concerns, we have painted ourselves into a corner as a species living on this planet. We have increased in numbers to some 9 times more than the sustainable carrying capacity of the planet (assuming that population of 9 billion is now unavoidable). The only reason we have not yet experienced mass starvation is, yet again, the availability of this ‘almost free’ energy.

We have increased our reliance on energy – be it to heat our homes in the winter, be it to cool our homes, cars and working environments particularly in unsuitably hot areas, be it our reliance on transporting goods around the planet, be it our energy and fertiliser based food production. We are now so reliant on ‘almost free’ energy, that we can no longer live without it.

Just imagine a world, were supermarkets are empty because there is no energy for transportation, homes are cold (we can hardly imagine that in these days of unlimited heat from central heating systems), where we can only work as far away as we can walk, where all food and most goods need to be produced in our own locality as there is no freight transport available, where basic services, such as the NHS, the police and fire service no longer function due to factors that in the final analysis boil down to energy.

And yet, that is the world we are now approaching, as we face loosing this ‘almost free’ energy and here is why:

It so happens that we are now (since 2005 actually) on the top of the world production curve for crude oil. Industry statistics point to the end of 2009 or start of 2010 as the beginning of the world decline in oil production. Just like the USA has peaked in oil production in 1972 and just like the UK has peaked in 1999, the world is peaking now in 2005-2009 (a four or five year flat top peak). And just like the USA and just like the UK and just like every single other oil producer on the planet, the world oil production will start to decline and it will continue to decline at a rate estimated at 3-4% per year (that is halving supplies every 20 years!) for the rest of time.

Yes, for the rest of time. You see, our oil reserves were just a one-off shot of free energy that our generations have been lucky enough to discover and unwise enough to exploit in such a headlong unsustainable rush for growth. There will be no more than a comparative trickle of further discoveries. The trend in discoveries of new oil fields is clear: the peak of discoveries was in 1962 (45 years ago!) and now discoveries run at about 20% of our actual usage. It does not take a genius to workout what the result will be.

Peak Gas will follow some 10 years after Peak Oil, probably by 2015.

True, renewables will provide some energy for the very basics and nuclear power will help in the next couple of decades, but neither of these, nor any other source or combination of sources of energy comes to anywhere near to replacing the amount of energy we are using now. If you have been to one of Paul Mobbs talks (Energy Beyond Oil) you will understand that. If not, have a look at 'Why Transition' page on this site or better still, buy his book

Have a look at the Transition Resources section or the Background section to learn more about Peak Oil and Peak Gas if you still have any doubts about it.

The consequences for our civilisation are extremely severe. The most fundamental consequence is that as a result and following a century of Growth, we are now entering a century of Decline and Depression.

Every type of Growth you can think of is now beginning to reverse itself. The most obvious is Economic Growth – GDP, wealth, spending, product availability, food availability, services, pensions, stock markets, etc, etc – all are beginning to decline and all will continue to decline for the foreseeable future.

It is almost inconceivable to imagine living in a century of Decline. We are so fundamentally accustomed to thinking in terms of growth, expansion and innovation. It is very hard to visualise how normal life can carry on in a declining economy and declining civilisation.

It makes little sense to invest in the stock market when the average stock is declining in value and it certainly makes no sense at all for stocks to be valued at 16, 20, 30 times their price/earnings ratios, as is the case now. That is why stock markets have already lost some 30% of their value (and that’s just on the investors assumption that we have a short recession!) and will come down much further, to perhaps 10-15% of their peak values (i.e.FTSE at about 1000).

Assuming of course that the current world financial system survives at all. I doubt it will. The era of Growth, with its constant expectation of greater profits in the future, combined with the extreme irresponsibility of the bankers and financiers, bordering on the criminal, has burdened the financial system with debts which are 10 times larger than the GDP of the whole planet! (See my previous blog: $500tr derivatives v. $50tr GDP of the planet). These debts can never be repaid. They could not have been repaid even during the Growth era, but now, in the Decline era there is no possibility whatsoever.

Just consider, everyone in the media, the politicians and the experts tell us that the financial problems are caused by the subprime mortgage scandal in the US. If so, why is the problem not solved yet? All the subprime mortgages in the US are worth some $1.5tr, but the world governments have pumped more than $9tr into the banking system, and still, the problem continues. The problem continues because of the enormous burden of debt, that can never be repaid and that will eventually collapse the whole system.

So, the various extravagances that have developed over the past 10+ years are starting to vanish. From overpriced stocks and overpriced property, residential or commercial, from frequent far away holidays, from extravagant consumption to our exploitative use of fuel and energy in general – all that and more is sinking and disappearing in front of our eyes and it will continue to do so.

High oil prices and the financial crisis having induced a recession, energy prices have now decreased. But make no mistake, the geological factors underlying Peak Oil and Peak Gas have not changed a bit. Prices are down simply due to a small reduction in oil consumption. Less than 1% reduction has made the difference between overstretched oil supply and small excess of supply over demand and thus reduced prices.

But, oil production will still decline as mentioned above – this is simply a geological fact of life, not something that we or the ‘market’ can influence. So either we will start recovering from the current recession, in which case oil demand will quickly pick up and prices will soar away to and above the record levels. Or we will not recover from recession, in which case sometime in 2010 oil production will fall below the reduced level of consumption and oil prices will soar again. Heads we lose, Tails we lose.

Once the extravagances are gone, the century of Decline will start taking away what we regard as essentials of life: reliable electricity and water supplies, gas/ oil/ coal deliveries, supermarkets, distribution of goods generally, the NHS and large hospitals in particular, social and educational services, leisure services, transport services (private cars will be severely restricted or banned altogether), private and state pensions, army and police – all that and more will be reducing and disappearing as we descend into the 21st century.

Unfortunately, governments either do not yet understand that or, not having a solution, are too scared to discuss or explore these subjects. After all, who will get elected on a program of a century of Decline!

Yet, this is exactly what we need. We need a government that plots a path of least destruction and least suffering. No such luck I think. We are on our own.

Transition is one way local communities can help themselves by setting up whole series of self-help schemes and groups for anything from learning how to grow vegetables or how to slaughter a pig, to community owned energy generation, be it wind farm, anaerobic digester generating gas for heating and cooking from slurry, green biomass and a bit of heat.

The possibilities are endless, but the time is short.

Start today by registering here and leaving a message in the Parish Forum section for other like-minded neighbours.
Start a group with your neighbours. Invite us to show you a film or two or to give you a talk. Share the knowledge that now exists in your community.

We can all do a lot to prepare ourselves individually and as a community, for the sake of ourselves, of our families and children.

The Peak Oil plateau streches from 2004 to 2010. 2005 was a peak, now very slightly exceeded by 2010. However, the quality of the oil is now much lower, meaning that more of that oil needs to be used to extract the oil in the first place and to refine it afterwards. That’s why we are currently on the longest run of high oil prices ever. Net crude oil production appears to have peaked in 2005!

Thanks for sharing this blog! Face it. The odds of a recession have grown. Before this recession is over, every person will think long and hard about the sacrifices they have to make to survive the recession. We can save money, energy, time and food. The basic commodities we need to survive are all in our hands. If you grow your own food, you're producing what you eat, and those results can be rewarding. You really don't need acres of land – you can grow plants in pots, or a small patch a few feet square in your yard can do the trick. Also, the age old practices of canning, and learning how to dehydrate your food can store this food that you grow for a long time. In lieu of the microwave, you could also learn to cook with a crock pot or convection oven. Crock pots are great for making stews, soups and roasts, everything but the kitchen sink meals, which will make the veggies stand out if you grow your own food.

Not much in terms of the world economy - that we have to leave to the 'experts' to stumble around and eventually crash the whole system. To be followed by a Peak Oil induced depression.

But this is what you can do for yourself (and what I have already done or doing now):

If you own shares: sell them. Never mind how low their price is, it will get much lower. Once investors realise the full implications of Peak Oil, the FTSE will collapse to about 1000, I estimate on the basis of P/E ratios in a long term depression.

If you have cash: invest it in something real (agricultural land for food/ energy crops, forest for renewable energy source - wood, perhaps gold, a workshop for you to carry out a trade, etc). That is most likely to keep and increase its value in real terms and bring in income or self-sufficiency as well.

Or invest in your own skills. Train in permaculture, woodwork, electrical equipment or installations, baking, dress making or whatever you think is likely to be in demand in your locality as we descent into the 21st century.

Or just buy non-perishable stuff. Stuff is really cheap at the moment and will get much, much more expensive in the future: clothing, shoes, tools, material, anything that you may need to replace in the future.

If you have pension fund(s): set up your own SiPP pension and transfer all your other pensions into it. With SiPP you get to decide where the money is invested - perhaps in the same areas as described above).

Apart from all that, grow your own veggies, plant a few fruit trees, learn about wild foods and herbs, and most of all engage with your neighbours to make your community more resilient. The last thing you want is to improve your own situation only to find that your neighbours steal it from you when TSHTF.

Why not start a Transition Group. Use this website to communicate with other groups and individuals involved in Transition, use the website to follow Transition News, to attend Transition Events, to use Transition Resources, to buy or barter locally, etc etc.

I am no 'financial expert', but I walk the walk. And its already clear that it is the right way to go.